"It's the economy, stupid" is one of the blunter sayings from American politics.

Well, now it needs updating. If you don't have a skilled workforce, a strong economy will become unsustainable. And, let's face facts - the UK's skills are looking ramshackle.

Other countries have much better skill levels; India and China, in particular, are fast overtaking us.

That was the blunt message from this week's long-awaited UK skills audit, the Leitch Report, which was fully endorsed by the chancellor in his pre-budget report.

So it seems the new political message should be: "It's skills, stupid."

'Mediocrity'

Lord Leitch did not pull his punches: The UK is "on track to achieve undistinguished mediocrity" if it fails to upgrade the skills of its workforce by 2020.

It is perhaps part of Britain's problem that the chattering classes are not very interested in skills

His case is that unless we dramatically improve our work-related education, our economy will shrink and our standard of living will fall.

The nation's economic performance will be the equivalent of England's current performance in the Ashes.

The Leitch Report did not earn big headlines. It should have done. It is perhaps part of Britain's problem that the chattering classes are not very interested in skills.

They might notice a shortage of plumbers but - to judge by media interest - they are far more interested in rows about the admissions criteria at a few top universities than in the skill levels of the entire workforce.

The facts are pretty stark. According to the Sector Skills Development Agency the UK is currently still about the fourth or fifth largest economy in the world but in terms of human capital we languish in 17th place.

'Skills, skills, skills'

Too many people stop learning far too young. Participation levels in post-16 education and training are below the Organisation for Economic Co-operation and Development (OECD) average.

This affects productivity. According to Leitch, the average French worker is 20% more productive per hour than their British counterpart. In Germany they are 13% ahead.

This week, Gordon Brown promised to implement Leitch's ambitious recommendation. If he gets into Number 10, we can expect the Blair's "education, education, education" to be modified to "skills, skills, skills".

Britain's business leaders have recognised the urgency of the task. A recent survey by Lloyds TSB found that problems recruiting qualified staff were causing more boardroom headaches than either the threat of terror attacks or bird flu.

And 48% of Britain's largest 2,000 companies said they were experiencing difficulties recruiting qualified workers.

So that's the problem. What's to be done about it?

Ambitious targets

By accepting Leitch's recommendations, Gordon Brown has adopted targets that are so ambitious they are likely to prove a political hostage.

The new targets will, according to David Melville, chairman of Lifelong Learning UK, effectively "double the progress expected in the current government targets".

So, for example, Leitch called for an increase from 29% to 40% of the proportion of the workforce with graduate level qualifications. And, lower down the scale, he wants 90% to have GCSE-level skills by 2020, instead of the 69% now.

All of this is a huge challenge to universities, further education colleges, work-based trainers, and schools.

We can now expect the post-16 education sector to undergo the same revolutionary change, and pressures, that schools have faced over the past two decades.

It is not going to be comfortable.

Further education colleges have taken a battering recently. Many are very good.

The message is stark: Underperforming colleges must improve or lose their funding. The Further Education Bill takes new powers to close failing colleges in much the same way as happened with schools.

Employers are the new blue-eyed boys. As Leitch says the "mantra" is now "demand-led" and "economically valuable" skills.

Vocational courses are sometimes seen as second-rate

In other words, it is business not the education sector that will decide what is taught and how it is delivered.

However, as many in education point out, businesses sometimes fail to put their money where their mouth is.

Some hoped the government would require employers to provide, or fund, the training their workers will need, not just in their current job but throughout their careers.

Asked about that this week, Alan Johnson admitted employers might now be in "the last chance saloon".

Yet, while compulsion remains a possibility, Johnson noted that the evidence from abroad suggests that forcing employers to train does not work.

Individual responsibility

The onus is not just on employers, though. Individuals will be expected to take responsibility for updating their skills.

So the government will take the risk of going down the learning account route again, despite the chaos that surrounded the failed Individual Learning Account debacle.

Schools and sixth form colleges must also play their part - 16 to 19 education currently looks to be the most confused area of education policy.

The prime minister's recent encouragement for the International Baccalaureate (IB) has only added to the complexity of the post-16 pathways available to young people.

From 2008 there will be a choice of A-levels, the IB and other new routes into university such as the pre-U, the new diplomas and vocational qualifications.

There is a clear danger that these options will be sorted into a hierarchy of very separate academic and vocational routes.

The government is already worried that the new Specialised Diplomas have been misunderstood.

Phil Hope, the Minister for Skills, told a business audience this week that the diplomas were not vocational. This hints at a fear that they will be seen as second-class, behind A-levels and the IB.

As Leitch says, the evidence from other countries suggests that "parity of esteem of the vocational route and a smoothing of the current break point at age 16 are needed to achieve world-leading levels of post-16 participation in education and training".

Since the government decided not to incorporate GCSEs and A-levels within the diplomas, many have had doubts whether there will be either "parity of esteem" or a "smoothing" of the transition from academic to vocational education.

With Gordon Brown talking about keeping all young people in education or training until 18, there is clearly a need for a smoother transition at 16, making it easier to combine the academic and the vocational.

There is a lot at stake. The Leitch Report holds out a big prize: A better skilled workforce could bring an estimated gain of £80bn to the British economy over the next 30 years.

That would pay for an awful lot of hospitals, schools, police officers, consumer spending or whatever else we choose to spend it on to improve our quality of life.

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